Industry watchers bemoan the government's move to nationalise private pensions and reduce the retirement age, Rodrigo Amaral reports
The system was also not able to conquer many Bolivians’ hearts, which made it easier for Morales to dismantle it, surfing the wave of popular discontent against so-called neo-liberal policies that lifted him to power in the 2005 elections. “The 1997 reforms had a large fiscal cost, and the state had to cope with them at the same time that the economy was in crisis,” Jemio recalled. “Many people associated the effects of the crisis with structural reforms, including the pension system, which was not really true. Other countries, like Peru and Chile, stuck to reforms even though they also went through crisis in the same period.”
Future challenges
The changes implemented by Morales maintain some of the feature of the 1997 regime. But the differences are dramatic enough to make experts fear for the future of the pension system. For starters, the government determined that pension funds transferred their assets to a newly formed state-owned company, Gestora de Seguridad Social de Largo Plazo, which will be solely responsible for it.
The new structure raises concerns because, among other reasons, Gestora will not be subject to an independent supervisory body. Instead the law determines that an agency of the central government will be the responsible for keeping the company on the right track. “In Bolivia, the public sector does not have much management capacity,” Jemio warned. “For instance, the management of the nationalised oil and gas industry has been very poor. The same could happen with the pension system.”
Eyebrows have also been raised because the government, which has seen its fiscal position deteriorate recently, will have much leverage to decide how to use the assets that belong to more than 1.2 million workers. “We are moving from a system fully managed by private companies that offered guarantees to savers to one that is completely handled by the state, and in which the state have many conflicts of interest,” Ferrufino pointed out. “The risk is that the pension system could be turned into a tool for the state to balance its books.” Jemio agreed: “With the funds now under management by the state, it is probable that, at some point, the government decides to simply match assets and liabilities and cancel a large part of the public debt,” he said.
